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The US stock indices registered strong gains last week with the Nasdaq gaining the most as tech and growth stocks seeing a strong bounceback. The market seems to have already priced the Fed hikes beforehand.
Last week was great for the US stock market as the S&P 500 registered its best week since 2020 while futures remained steady. Over the last week, the S&P 500 (INDEXSP: .INX) gained 6% adding 260 points and ending at 4,463 levels.
After the strong last year of 2021, 2022 has been the year of great volatility and corrections. The Fed’s plan of raising interest rates to control four-decade-high inflation brought strong volatility. Adding fuel to the market uncertainty is the geopolitical concern with the Russia-Ukraine war.
During the overnight trading session on Sunday, March 20, the US stock futures remained steady. However, as of press time, Dow Futures are down 144 points. Similarly, the S&P 500 futures are down by 0.4% at press time.
As said, the last week turned out to be the best since November 2020 for all three US stock indices. Just like the S&P 500, the Dow Jones Industrial Average (INDEXDJX: .DJI) also clocked 5.5% weekly gains. On the other hand, the tech-heavy Nasdaq Composite (INDEXNASDAQ: .IXIC) clocked 8.6% gains with the resurgence of the growth stocks. Speaking to CNBC, Ryan Detrick of LPL Financial said:
“After one of the best weeks in years, now the question is will stocks be able to hold those gains? One bit of good news is April is historically one of the best months for stocks, so the calendar remains a positive for the bulls”.
Strong Clarity From Federal Reserve
Last week, the Federal Reserve raised interest rates by 0.25% for the first time in four years. However, the market responded positively to this event as it already factored in this event. Furthermore, the market reacted positively as the Fed provided clarity on future rate hikes.
The US Central bank has said that it will be raising rates during all of the six meetings ahead this year. Of course, it can turn more hawkish if the inflation numbers continue to grow in the subsequent months.
“I think the stage has been set by the Fed for investors to focus on earnings again. Bottom line…earnings estimates since the beginning of the year have risen,” said Julian Emanuel, head of equities, derivatives and quantitative strategy at Evercore ISI.
On the other hand, the peace talks between Russia and Ukraine just hover around making little progress. Ukraine’s President Volodymyr Zelenskyy has also warned that it could potentially turn into a third global war. On Sunday, March 20, Zelenskyy said:
“If these attempts fail, that would mean that this is a third world war”.
On the other hand, investors are also looking at the latest surge in the COVID cases in Europe stemming from a new variant.